Crude Summit: LatAm crude displaced at USGC

OREANDA-NEWS. US Gulf coast refineries are as efficient as any on the planet and better than most, but companies on the coastline are processing more light sweet crude than heavy sour crudes, said Valero CEO Joe Gordor today.

The arbitrage for Colombian sour crude to the US Gulf is continuing to deteriorate. And Canadian heavy sour crude, which currently totals about 40pc of foreign imports to the US, is becoming more available on the US Gulf, further displacing Latin American crude.

"The shale revolution has driven down non-Canadian crude imports," Gordor said at the Argus Americas Crude Summit today, a trend he expects to see continue.

Enbridge's 600,000 b/d Flanagan South pipeline (FSP) came online in December, bringing heavy Canadian crude volumes from Flanagan, Illinois, to Cushing, Oklahoma. And a connection to the 450,000 b/d Seaway twin pipeline gives those volumes further access to Gulf coast refineries.

Most of the increase in US production is light sweet crudes, but domestic refiners with the ability to process heavier crude are relying on an increasing supply of Canadian crude, which is selling at wider discounts to Colombian crude, to fill that additional capacity.

Heavy Western Canadian Select (WCS) at Cushing was assessed today at a discount to Colombia's heavy sour Castilla Blend delivered to the US Gulf of about \$2.45/bl after calculating in minimum tariff and freight costs.

To compete again on the US Gulf, Castilla Blend would have to lower its cost to a matching level. But if Canadian producers continue supplying the US Gulf at a growing speed, the WCS price would continue to fall.